In a statement, EDP said it would buy Viesgo for a net equity investment of 900 million euros, and the deal, which will more than double EDP's presence in electricity distribution in Spain, would be financed through a rights issue worth just over 1 billion euros.
Although global M&A activity tumbled to its lowest level in more than a decade in the second quarter as many firms gave up on expansion plans in the wake of the coronavirus outbreak, the slump has been somewhat lighter in Europe and some dealmakers have seen a gradual pick-up as companies adapt to a post-coronavirus reality.
The Viesgo deal is expected to be sealed by the end of the year.
"Viesgo's transaction ... represents a unique investment opportunity for EDP, being fully aligned with its equity story focused on growth in renewables and networks," said EDP's interim chief executive, Miguel Stilwell d'Andrade.
The transaction, which puts Viesgo's enterprise value at 2.7 billion euros, will result in EDP consolidating Viesgo's existing net financial debt of 1.1 billion euros.
EDP and Macquarie Infrastructure and Real Assets (MIRA) also agreed to establish a long-term electricity distribution partnership in Spain, and under the terms of the deal MIRA will own a 24.9% stake in EDP's Spanish electricity distribution unit ERedes and in Viesgo's electricity distribution units.
MIRA will invest 700 million euros including debt and equity.
As part of the deal, EDP, through its subsidiary EDP Renovaveis, will also acquire 100% of Viesgo's renewables business comprising 24 wind farms and two mini-hydropower plants for an enterprise value of 565 million euros.
(Reporting by Catarina Demony and Sergio Goncalves, Editing by Andrei Khalip)